Circa 1988: Walton gave up his post of CEO of Walmart but remained on the board as Chairman until his death (1992). Walton created a great business out of the idea that came from a barber, Herb Gibson, “Buy it low, stack it high, and sell it cheap.”
Cut to the present: Walmart is still the number one retailer in the world and has recently undergone a brand makeover. It’s new logo has the ‘hy phen’ missing and Walmart is one word! But is this something new? Not if we tell you that Walmart has done this several times before! What is however unique here is the idea of remodelling the existent Walmart stores. During the year, the company has promised that it would remodel 350 stores in US. And if this excites you, Eduardo Castro-Wright, President & CEO of the U.S. stores division has some better news for you. “The number of remodelled stores could double to about 700 each of the following two years,” he claims. Indeed, Walmart had banked on the low-cost factor for a truly long time, and had ignored the essence of marketing and in-store experience and appeal to its consumers. Agrees Susan Rider, President, Rider & Associates, “Sam Walton was an example of a businessman that cared to provide a low cost product so that people could afford a better way to live. I believe that is still the mantra for Wal-mart but when you have thousands of managers and executives, the concept may get lost...”
However, senior officials at Walmart continue believing in the low-cost model, so much so that they have even extended their private label portfolio to combat shrinking margins. But somehow, Walmart’s image (after all the legal suits) is getting tarnished by the day, even when it comes to the quality of the cheap products it sells. “Most of this ‘cheap’ inventory comes from overseas and has tarnished Walmart’s reputation of providing quality items,” affirms Doron Levy, President, Captus Business Consulting who further recommends the importance of ‘minimum’ quality focus for Walmart’s brand longevity.
As Sam Walton notes in his autobiography Made in America, “Walmart wouldn’t be what it is today without a host of fine competition, most especially Harry Cunningham of Kmart, who really designed the first discount store, and who in my opinion, should be remembered as one of the leading retailers of all time.” But Lee Scott, current CEO of Walmart wouldn’t want to use such positively expressive words for his competitors... Why you ask? During the past few years, Target, Metro, Carrefour and Tesco have emerged as the ‘new-age’ retail giants globally. To talk about US alone, Target is the one giving nightmares to Walmart as a recent Global Markets Survey by Citigroup on the latest shopping trends illustrates that Target’s prices are only 3% higher than that of Walmart’s on an average. The report further went on to warn that the reported in-store experience of Target was far better than that of Walmart’s. As Nikki Baird, Managing Partner, RSR Research remarks, “It took competing retailers longer than it should have to realise they couldn’t compete with Walmart on price. Customer-centric strategies have emerged very much as a response to Walmart. Today the retailers say that: if I can’t beat Walmart on price, then I’m going to change the basis of competition.” Really, Walmart has to move beyond the myopia of keeping its faith tucked in the blanket of just low prices!
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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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